Biosimilars Emerge As Winners In Annual Payer Muscle Flexing

Make no mistake, the power of the PBMs is growing and they are not afraid to wield it. The decision by the PBM (pharmacy benefit manager) CVS (NYSE:CVS) to exclude Sanofi’s (NYSE:SNY) core insulin products Lantus and Toujeo from its formulary in favour of Lilly’s (NYSE:LLY) Basaglar erased $3.4bn from the French pharma giant’s market value yesterday.

CVS’ clear endorsement of biosimilars in its annual update seemed to take many by surprise. But given the increasing determination of these gatekeepers to keep costs down this should come as no revelation. The message could not be clearer to big biotech brands facing patent expiry: expect to lose formulary backing very quickly when alternatives become available.

CVS’s backing of cheaper versions of products did not end at Basaglar. It also replaced Neupogen with Zarxio and vowed to include biosimilars as key components of its strategy in the future.

The next biosimilar launches in the US are likely to be Pfizer’s (NYSE:PFE) Inflectra, a copy of Johnson & Johnson’s (NYSE:JNJ) Remicade that won FDA approval in April, and Amgen’s (NASDAQ:AMGN) Humira biosimilar ABP 501. Legal disputes over patent expiry are keeping both new products off the market for now (US biosimilar space reaches its Inflectra point, April 6, 2016).

For all the debate around doctors’ and pharmacists’ views on interchangeability the power of those picking up the bill should not be forgotten. With the backing of the PBMs, US biosimilars launches could beat expectations.

First impact

This looks like it will be amply demonstrated by Sanofi’s Lantus, which will face direct competition from Basaglar when Lilly launches in December. The CVS endorsement should prompt sellside analysts to take a close look at their forecasts for this space.

Insulins - biggest upgrades and downgrades

Product (marketed unless stated)

Company

2020 sales ($m)

12mth chg in 2020 forecast ($m)

First launch

Down…

NovoRapid

Novo Nordisk

3,142

(1,371)

1999

Lantus

Sanofi

3,631

(1,189)

2000

Levemir

Novo Nordisk

2,334

(774)

2004

NovoMix 30

Novo Nordisk

1,916

(327)

2000

Humalog

Eli Lilly

2,728

(265)

1996

Up…

MK-1293 (filed)*

Merck & Co

169

139

2017

Toujeo

Sanofi

1,742

153

2015

Abasaglar/Basaglar*

Eli Lilly

825

194

2015

Tresiba

Novo Nordisk

2,128

435

2013

Faster-acting Insulin Aspart (filed)

Novo Nordisk

760

462

2017

Note: *biosimilars.

Click to enlarge

Click to enlarge

According to EvaluatePharma’s archived forecasts, consensus for Basaglar has been creeping up over the past few years, jumping 31% to $825m for 2020 over the last 12 months alone. The product remains decidedly in launch phase, having only reached the market in Europe mid-2015. It sold $16m in the second quarter of this year, but the long-term view is arguably still conservative.

Sanofi’s Lantus meanwhile has seen substantial downgrades over the last 12 months, with $1.4bn or 25% having been erased from consensus for 2020. Second-quarter sales fell 14% to €1.5bn, with price cuts in the US and biosimilars in Europe taking their toll.

The drop in Sanofi’s share price yesterday and further losses today suggest that the outlook for Lantus still needs adjusting. Also worrying for the company was CVS’ decision to exclude Toujeo, Sanofi’s newly launched insulin. Growth in this franchise is starting to offset declines in Lantus – indeed Toujeo is considered Sanofi’s third-most important sales growth driver.

Express Scripts, the other dominant US PBM, also published its 2017 exclusion list yesterday, and suggested that the launch of Basaglar would herald changes on its formulary. As such, the US could see a much quicker shift to biosimilars in the basal insulin space than many have been forecasting.

Negotiating tactic?

In an interesting twist, Sanofi’s bid target Medivation (NASDAQ:MDVN) was yesterday also targeted by CVS, which excluded its prostate cancer drug Xtandi from the anti-androgen class.

The move is in itself as notable as the Lantus decision, as PBMs have to date largely stayed away from the branded oncology space. Xtandi is widely considered a differentiated product and as such the move represents a clear shot across the bows of cancer drug pricing.

While Sanofi will be smarting from the Lantus snub, it can perhaps take solace in a new negotiating stick with which to beat Medivation.